http://www.nytimes.com/2010/10/23/technology/23facebook.html?_r=1&ref=todayspaper
Here is a brief quote:
In her paper, Ms. Korolova said she used public sources to collect information like the location, gender, age and interests of a Facebook user. Then she placed an ad on Facebook that was aimed at those characteristics and also to people who are interested in people of the same sex.
If Facebookâ€™s system indicated that the ad had been displayed to someone, she would know that the person was gay, because nobody else on Facebook was a match for those other attributes.